--- title: "New GST on Loan 2026: 18% Rate on Personal Loan, Interest" description: "New GST rate on loans in 2026 is 18% on processing fees and all loan service charges. Get GST-ready with Busy and apply the correct rate on every invoice." canonical: "https://busy.in/gst-rates/loan/" author: "Hitesh Aggarwal" published: "2025-05-15T07:49:03.000Z" category: "GST Rates" --- - The personal loan GST rate applies only to loan-related service charges, while the loan amount and interest remain outside GST. - **GST on loan processing fee and other loan-related service charges is generally applicable at 18%.** - Banks and NBFCs charge **18% GST on applicable service fees related to loans**. - GST paid on loan-related services may be eligible for Input Tax Credit for businesses, subject to applicable GST conditions. - Credit card EMI processing and handling fees generally attract **18% GST**. # New GST on Loans: Processing and Service Tax Explained Loans are an essential part of financial planning — whether it’s a personal loan, home loan, or business loan. But when it comes to taxation, many people are unsure about the **gst on loan**. Is GST charged on interest? What about processing fees? Let’s clear up the confusion. ## **New GST Rate on Loan-Related Charges in India** The revised GST rates applicable from **22 September 2025** continue to apply **18% GST on taxable loan-related services and charges**. The interest component of loans remains exempt from GST. ## **Other Loan-Related Charges That Attract GST** While **GST on loan interest** is not applicable, several loan-related service charges attract GST. | Charge Type | New GST Rate (After 22 Sep 2025) | Old GST Rate (Before 22 Sep 2025) | GST Applies? | | --- | --- | --- | --- | | Loan processing fee | 18% | 18% | Yes | | Documentation charges | 18% | 18% | Yes | | Pre-payment charges | 18% | 18% | Applicable as per GST provisions | | Foreclosure charges | 18% | 18% | Applicable as per GST provisions | | Late payment charges/fees | 18% | 18% | Applicable as per GST provisions | | Loan cancellation charges | 18% | 18% | Applicable as per GST provisions | **Note:** These loan-related service charges were already generally covered under the **18% GST slab**. The GST rate remains 18% after the 22 September 2025 revision. GST on loan interest remains exempt. ## Is GST Applicable on Loan Amount or Interest? No, GST is not charged on the principal loan amount or on the interest charged by banks or NBFCs. - The loan amount is not a supply of goods or services, so it’s not taxable. - The interest on loan is considered a financial service and is exempt from GST. So, whether it’s a home loan or a **gst for personal loan**, you don’t pay GST on the actual money you borrow or the interest you repay. **Get a Free Trial –** [**Best Accounting Software For Small Business**](https://busy.in/accounting-software/) ## GST on Loan Processing Fees Here’s where GST does apply. Banks and financial institutions usually charge a processing fee, which is a one-time charge for handling your loan application. This fee is considered a taxable service. **GST on loan processing fee is charged at 18%.** **Example:** - If your processing fee is ₹5,000, the GST charged will be ₹900. - Total payable = ₹5,900 **Get a Free Trial –** [**Best GST Accounting Software For Small Business**](https://busy.in/accounting-software/gst-accounting/) Live Demo Available Today ## Track Loan Recovery Outstanding Across All Borrowers Trusted by 6,00,000+ Users 4.6 Google Rating \* No credit card required ## GST on Personal Loans Let’s look specifically at the **gst for personal loan**: - No GST on loan amount - No GST on interest - 18% GST on processing and admin fees This structure applies whether you take the loan from a bank or an NBFC. ## Business Loans and Input Tax Credit If you’re a business owner and you take a loan for business purposes: - You can [**claim Input Tax Credit**](https://busy.in/gst/what-expenses-can-be-claimed-as-itc/) (ITC) on the GST paid on charges like processing or foreclosure, if these services are used for business. - However, if the loan is taken for personal or exempted activities, ITC cannot be claimed. ## Conclusion To sum it up, **gst on loan** does not apply to the loan amount or interest — but it does apply to processing fees and other service charges, typically at 18%. Understanding this can help you avoid surprises when you apply for a loan and even [**claim Input Tax Credit**](https://busy.in/gst/what-expenses-can-be-claimed-as-itc/) if the loan is for your business. ## About the author **Hitesh Aggarwal** As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience. ## Frequently asked questions ### Is there GST on loan interest? No. Interest on loans — whether personal, housing, or business — is **exempt from GST**. ### What is the GST on loan processing fee? The **standard GST rate is 18%** on all loan-related processing or administrative fees. ### Can I claim ITC on GST paid on loan charges? Yes, if the loan is **used for business purposes** and the borrower is registered under GST. ### Do NBFCs charge GST like banks? Yes, both **NBFCs and banks charge 18% GST** on service fees related to loans. ### Is GST applicable on credit card EMIs? Yes, any **processing or handling fees on credit card EMIs** attract **18% GST**. ## Related articles - [New GST on Skincare Products: Rate, Branding & Retail Pricing](https://busy.in/gst-rates/skincare-products/) - [New GST on Industrial Machinery: Slabs, ITC & MSME Effect](https://busy.in/gst-rates/industrial-machinery/) - [New GST on Restaurant Meals: Dine-in, Takeaway & Delivery Compared](https://busy.in/gst-rates/restaurant-meals/) - [New GST on Kitchen Utensils: What’s Taxed and What’s Not?](https://busy.in/gst-rates/kitchen-utensils/) - [New GST on Online Education: Rate, Exemptions & EdTech Impact](https://busy.in/gst-rates/online-education/) - [New GST on Packaging Materials: Tax Implication Across Industries](https://busy.in/gst-rates/packaging-materials/) - [New GST on Digital Marketing Services: Tax Rates & Input Credit Explained](https://busy.in/gst-rates/digital-marketing-services/) - [New GST on Pesticides: Rates, Agri-Exemptions & Sector Impact](https://busy.in/gst-rates/pesticides/) - [New GST on Butter: From Dairy to Dining – What You Pay](https://busy.in/gst-rates/butter/) - [GST on Honey: Rate, Applicability & Industry Outlook](https://busy.in/gst-rates/honey/)